http://www.pabadfaithlaw.com/ Fineman Krekstein & Harris, P.C. - Pennsylvania Insurance Bad Faith Case Blog en-us Wed, 10 Mar 2010 07:23:25 GMT Fri, 26 Feb 2010 16:53:00 GMT Blog by Inherent, Inc. lapplebaum@finemanlawfirm.com lapplebaum@finemanlawfirm.com http://www.pabadfaithlaw.com/display_blog.cfm?bid=2332E3C7-66F7-48C1-B244B59F0F3900E2 In Lockhart v. State Farm Mutual Automobile Insurance Company, the insured sued his insurer after it denied his vehicle theft claim.  The insured claimed that he had parked his truck outside of the grocery store, shopped for 30-45 minutes, discovered that his truck was missing, and immediately reported the theft to the police.  The insured’s policy covered theft but excluded coverage if the vehicle was stolen “by or at the direction of an Insured.”  The insured also purchased “GAP insurance” for the difference between the cash value of the vehicle and the amount owed on the note, which was approximately $10,000.00 at the time of the incident. The insured told the claims representative that, at the time of the incident, his truck was locked and that there were two sets of keys – one in his possession and one hidden inside the center console of truck.  The insurer’s records indicated that the insured had made a vehicle theft claim four years earlier.  The insurer began an investigation of the claim, which revealed multiple suspicious facts.  In the weeks prior to the reported theft, the insured had visited several dealers in an effort to trade in his truck for a new one.  When the police officer who was investigating the incident asked the insured about additional keys to the truck, the insured told him that there was not a key inside the truck, which was inconsistent with his statement to the claims representative.  The police officer did not find any broken glass or other evidence of a break-in.  Additionally, two employees working outside of the grocery store had not noticed any suspicious activity around the time of the alleged theft.  The insurer requested an expert report regarding the truck’s anti-theft system.  The expert opined that there was only a “remote” possibility that the vehicle was stolen without the use of a key.  The expert determined that it would have taken at least thirty minutes to deactivate the alarm and start the vehicle, and that the use of a tow truck would have been noticed by others.  Additionally, the insured never provided his cell phone records as requested by the insurer, and the insured’s wife never contacted the investigator as repeatedly requested.After completing its investigation, the insurer concluded that the loss “was not direct, sudden and accidental as defined under the policy,” and that the insured had made material misrepresentations during the presentation of the claim.  Accordingly, the insurer denied the claim.  The insured sued for statutory bad faith and breach of contract, and the insurer filed a motion for summary judgment.  In considering the motion for summary judgment, the court emphasized the insured’s heightened burden as well as the fact that a bad faith claim cannot succeed if the insurer acted reasonably.  The court stated, “Our courts have repeatedly held that an insurance company’s substantial and thorough investigation of an insurance claim, which forms the basis of its refusal to make or continue making benefit payments, establishes a reasonable basis that defeats a bad faith claim.”  The court concluded that the insurer performed a comprehensive investigation of the insured’s claim and that the investigation revealed sufficient information to make the insurer’s decision reasonable.  Accordingly, the court held that the insurer was entitled to summary judgment on the bad faith claim.  Date of Decision: February 16, 2010Lockhart v. State Farm Mut. Auto. Ins. Co., 2:08-cv-993, United States District Court for the Western District of Pennsylvania, 2010 U.S. Dist. LEXIS 12992 (W.D. Pa. Feb. 16, 2010) (McVerry, J.). Claims Handling Procedures Fri, 26 Feb 2010 16:53:00 GMT http://www.pabadfaithlaw.com/display_blog.cfm?bid=2332E3C7-66F7-48C1-B244B59F0F3900E2 http://www.pabadfaithlaw.com/display_blog.cfm?bid=CC6FE1AB-D2D6-4139-940E3AF2BC531368 In Johnson v. State Farm Life Insurance Company, the plaintiff filed suit individually and as Administratrix of the estate of Terry Johnson, plaintiff’s husband, for various claims stemming from the purchase of a life insurance policy issued to Mr. Johnson.  On October 11, 1989, the insurer issued a $10,000.00 whole life policy to Mr. Johnson, in which plaintiff was listed as the beneficiary.  On February 10, 2007, Mr. Johnson allegedly went to an agent of the insurer, to cancel the policy because he did not want plaintiff to receive the proceeds.  The agent initially talked Mr. Johnson into keeping the policy and changing the beneficiary, but a few days later, Mr. Johnson returned to reinstate plaintiff as the beneficiary, and then returned again to cancel the policy.  The agent, who had known Mr. Johnson for many years and was aware that he was using drugs, suggested that he buy the policy because he did not want to see Mr. Johnson lose coverage.  On February 19, 2007, the agent purchased the policy for $100.00.  Mr. Johnson passed away five days later in prison – Mr. Johnson had turned himself in for violating plaintiff’s restraining order.   Plaintiff sued for common law bad faith and violations of Pennsylvania’s bad faith statute.  Plaintiff argued that her bad faith claim was based on: (1) the way the insurer handled her claim before the agent purchased the policy and (2) the fact that the insurer conditioned the policy proceeds on her release of all claims against it.  The insurer argued that plaintiff’s claims should be dismissed because she failed to state a claim for any of her causes of action.The court held that plaintiff was unable to establish bad faith and dismissed the claims.  In dismissing plaintiff’s common law bad faith claim, the court held that Pennsylvania does not recognize a common law cause of action for bad faith cases in insurance cases.  The court held that because plaintiff did not file her insurance claim until after the agent purchased the policy, it precluded a finding that her bad faith claim revolved around how her claim was handled.  Further, the court held that there was no statutory bad faith because plaintiff was paid the entire proceeds of the policy plus interest.  The court concluded that “benefits were not denied under the Policy or compromised in any way; rather, it appears that [plaintiff] received everything to which she was entitled.”  In addressing whether seeking a release of the bad faith claims itself could constitute bad faith, the court stated: "Moreover, it is unclear to the Court how conditioning the payment of the full proceeds on her release of any claims against State Farm constitutes bad faith where the value of the claim was established by the face of the Policy and was tendered in full.  As argued by State Farm, “[a]n insurance company need not submerge its interests to that of a beneficiary,” and is entitled to insulate itself from potential litigation." (citations omitted) Date of Decision: January 14, 2010Johnson v. State Farm Life Ins. Co., Civil Action No. 09-207, United States District Court for the Western District of Pennsylvania, 2010 U.S. Dist. LEXIS 10727 (W.D. Pa. Jan. 14, 2010) (Reynolds, U.S.M.J.). This Report and Recommendation of the Magistrate Judge was adopted by the District Court in Johnson v. State Farm Life Ins. Co., Civil Action No. 09-207, United States District Court for the Western District of Pennsylvania, 2010 U.S. Dist. LEXIS 10473 (W.D. Pa. Feb. 8, 2010) (McVerry, J.). General Bad Faith and Litigation Issues Thu, 25 Feb 2010 17:38:00 GMT http://www.pabadfaithlaw.com/display_blog.cfm?bid=CC6FE1AB-D2D6-4139-940E3AF2BC531368 http://www.pabadfaithlaw.com/display_blog.cfm?bid=C042EC3C-5FA3-42D4-B0215B0D615CACD8 In Nordi v. Keystone Health Plan West Inc., the Superior Court of Pennsylvania addressed two issues: (1) whether the HMO or its service provider acted in bad faith when they refused to cover the insured’s additional physical therapy sessions, and (2) whether an HMO is exempt from the bad faith statute by the Health Maintenance Organization Act.  After the insured was injured in a car accident, her HMO approved twenty outpatient physical therapy visits beginning March 22, 2002, and ending May 21, 2002.  On May 23, 2002, the insured requested additional therapy sessions.  The HMO denied her request on the basis that the insured had exhausted her coverage, which permitted only 60 days of therapy.  The insurance policy provided that rehabilitation therapy services “are limited to treatment for conditions which in the judgment of the PCP and [insurer] are subject to significant improvement within a period of sixty (60) days and are limited to sixty (60) days from initiation of treatment per condition, per type of therapy.”  The insured sued her HMO and its service provider for breach of contract and bad faith denial of insurance benefits.  The insured argued that the policy language was ambiguous because it was not clear whether the language applied to sixty calendar days or to sixty therapy days.  The trial court granted summary judgment in favor of the HMO on the basis that the plain meaning of the contract language was to provide therapy sessions over a sixty-day period beginning with the first therapy sessions.  The trial court did not address the insured’s other claims. The insured appealed.  In an attempt to prove that the policy language was ambiguous, the insured asked the court to consider the admissions of the HMO’s administrative personnel that many insureds had made inquires or submitted administrative appeals regarding the coverage limitation.  The Superior Court determined that the additional evidence did not prove that the policy language was ambiguous.  It stated: “Just because some people have difficultly understanding insurance policy language does not mean that the language is ambiguous . . .”  The Superior Court held that the plain and common sense meaning of the disputed contract language only obligated the HMO to pay for therapy services rendered within 60 days of the first visit.Additionally, the Superior Court held that the statutory remedy for bad faith does not apply to HMOs “whose enabling legislation specifically exempts them from laws relating to insurance corporations.”  Further, the Superior Court held that even assuming the service provider might be potentially liable for bad faith conduct as either a de facto insurer or participating tortfeasor, neither the HMO nor the service provider were guilty of bad faith handling of the insured’s claim.  The Superior Court affirmed the trial court’s decision.Date of Decision: January 22, 2010Nordi v. Keystone Health Plan West Inc., No. 1476 WDA 2008, Superior Court of Pennsylvania, 2010 Pa. Super. LEXIS 12, (January 22, 2010) (Cleland, J.)http://www.superior.court.state.pa.us/opinions/A23044_09.pdf    General Bad Faith and Litigation Issues Wed, 24 Feb 2010 17:06:00 GMT http://www.pabadfaithlaw.com/display_blog.cfm?bid=C042EC3C-5FA3-42D4-B0215B0D615CACD8 http://www.pabadfaithlaw.com/display_blog.cfm?bid=72BA23C1-A442-4E47-A5C9D8F3E1C3CA1B In Stehle-Rosellini v. Allstate Corp., the insured sued the insurer for breach of contract and statutory bad faith under 42 Pa. C.S. § 8371.  In the complaint, the insured did not specify an amount for compensatory damages but included two ad damnum clauses seeking: (1) damages in an amount subject to the policy limits of the contract, plus interest and court costs totaling less than $75,000.00 for the breach of contract claim and (2) an amount equal to the prime rate of interest plus three percent, punitive damages, attorneys’ fees, court costs, and any other relief that the Court may deem proper in excess of $30,000.00 for the statutory bad faith claim.  The insured filed a notice of removal based on diversity of citizenship, and the case was removed to federal district court.  The insured filed a motion to remand the action to state court, and the insurer filed a brief in opposition. The dispute was over whether the $75,000.00 amount in controversy requirement of 28 U.S.C. § 1332(a)(1) was satisfied.  The court stated that legal standard for meeting the $75,000.00 requirement depends on whether a plaintiff expressly limits the amount in controversy to an amount lower than the jurisdictional requirement.  Where, in the complaint, the plaintiff expressly limits the amount in controversy to less than the jurisdictional minimum, the defendant has the burden of proving to a legal certainty that the claim is in excess of $75.000.00.  Where the plaintiff has not expressly limited the amount to less than the jurisdictional minimum, the case must be remanded if it appears to a legal certainty that the plaintiff cannot recover the jurisdictional amount. The court found that the insurer had the burden to prove to a legal certainty that the claim was in excess of $75.000.00 because the complaint expressly limited the amount in controversy to an amount below the jurisdictional minimum.  The court stated that since the insured did not specify an amount for compensatory damages, the insured’s two ad damnum clauses must be considered in conjunction.  The court found that while the first ad damnum clause sought less than the $75,0000.00, the second ad damnum clause contained an open-ended demand, which included attorneys’ fees and punitive damages.  The court denied the insured’s motion to remand, holding that the insurer successfully proved to a legal certainty that the insured could recover the jurisdictional amount. Date of Decision: January 25, 2010Stehle-Rosellini v. Allstate Corp., Civil Action No. 09 - 895,Doc. No. 8, United States District Court for the Western District of Pennsylvania, 2010 U.S. Dist. LEXIS 5709 (W.D. Pa. January 25, 2010) (Lenihan, U.S.M.J.). Procedural Issues Wed, 03 Feb 2010 00:13:00 GMT http://www.pabadfaithlaw.com/display_blog.cfm?bid=72BA23C1-A442-4E47-A5C9D8F3E1C3CA1B http://www.pabadfaithlaw.com/display_blog.cfm?bid=3A348490-9030-4FA8-A1269813F0C8434E In Bonsu v. Jackson National Life Insurance Company, the district court held that the plaintiff’s claims for bad faith and breach of contract failed because the life insurance policy was void ab initio due to the applicant’s misrepresentations in the life insurance application. The facts underlying this case date back to 2002, when an individual purporting to be Kwaku Asamoah submitted an life insurance application naming his brother, Augustine Bonsu, as the sole beneficiary.  According to the application, Asamoah was thirty-five years of age; had never been diagnosed with a serious medical condition; his driver’s license had never been suspended or revoked; and he had never been convicted of a misdemeanor or felony offense.  Based on the answers he provided, Asamoah was given a “preference plus” policy rating and his semi-annual premium was fixed at $96.90.  On December 27, 2002, the insurer approved the application and issued a $250,000 policy to Asamoah.   In May 2003, Asamoah allegedly traveled to his native country of Ghana.  On May 13, 2003, however, Bonsu claims that Asamoah died in his sleep of unknown causes. After his allegedly death, Asamoah’s body was never examined by a physician and an autopsy was never performed prior to his burial.  On May 30, 2003, the insurer received a $98 policy premium payment allegedly sent from Asamoah.  Approximately two months later, on July 11, 2003, Bonsu contacted the insurer to report Asamoah’s death. The insurer’s claims investigator noted several red flags in the case, including Asamoah’s recent application for life insurance, his relative youth and purported good health, and his assertion that he had no preexisting medical conditions.  The insurer started a comprehensive investigation into Asamoah’s death.  The investigator was unable to find any evidence that Asamoah had ever traveled to Ghana, and the alleged death certificate provided by Bonsu was missing important information.  Additionally, the insurer was notified that “Kwaku Asamoah” was a fictitious name used by Bonsu as an alias to commit fraudulent acts, and that Bonsu had been arrested for business fraud, identity fraud, and insurance fraud.During its investigation, the insurer obtained a copy of Asamoah's Virginia driving record, which indicated that Asamoah’s license was suspended from September 2001 until March 2002 because of a reckless driving conviction.  In the state of Virginia, reckless driving is a misdemeanor.  Asamoah was convicted of a misdemeanor offense and his driver’s license was suspended approximately one year before he filed the life insurance application, which stated that his driver’s license had never been suspended or revoked and that he had never been convicted of a misdemeanor offense.On June 14, 2004, the insurer denied Bonsu’s claim for life insurance benefits because of its inability “to independently verify Mr. Asamoah’s death after an extensive investigation of the matter.”  Bonsu, the beneficiary of the life insurance policy, sued the insurer seeking benefits and bad faith damages.  The insurer filed a motion for summary judgment arguing that the life insurance contract was void ab initio due to false statements knowingly proffered by Asamoah during the application process, and asserting that its denial of benefits under the policy was reasonable given the information discovered during the investigation.Under Pennsylvania law, a life insurance policy is void ab initio when (1) the insured made a false representation; (2) the insured knew the representation was false when it was made or made the representation in bad faith; and (3) the representation was material to the risk being insured.  The court found that the first element was satisfied because an individual purporting to be Asamoah made a false representation on the insurance application when he stated that his driver’s license was never suspended and that he had never been convicted of a misdemeanor offense.  In determining the second element, the court stated that it could presume that Asamoah knew the answers he provided were untruthful due to the short period of time between his license suspension and his false responses, as well as the unequivocal nature of the questions posed and response requested.  The court found that the third element was satisfied because Asamoah’s misrepresentation resulted in a significantly lower premium, and that it was material to the risk assumed by the insurer.  The policy underwriter testified that had Asamoah provided truthful responses to the questions concerning his prior conviction and license suspension, he would have been given a “Standard” policy rating with a higher premium, and not a “Preferred Plus' policy rating.”In granting the insurer’s motion for summary judgment, the court concluded as follows: “In sum, a rational juror viewing the record evidence could reach only one conclusion: Asamoah knowingly provided false responses to [the insurer]’s policy questionnaire, and these responses caused [the insurer] to fix Asamoah’s premium at rate below that which he would have received by answering truthfully.  Because his life insurance policy was procured by means of knowing falsehood, Asamoah’s policy was void ab initio.  Without a valid policy, Bonsu’s claims for breach of contract and insurance bad faith necessarily fail, and [the insurer] is entitled  to summary judgment.”Date of Decision:  January 4, 2010Bonsu v. Jackson Nat'l Life Ins. Co., Civil Action No. 1:05-CV-2444, United States District Court for the Middle District of Pennsylvania, 2010 U.S. Dist. LEXIS 89 (M.D. Pa January 4, 2010) (Conner, J.) Reverse Bad Faith Tue, 26 Jan 2010 18:13:00 GMT http://www.pabadfaithlaw.com/display_blog.cfm?bid=3A348490-9030-4FA8-A1269813F0C8434E http://www.pabadfaithlaw.com/display_blog.cfm?bid=486264EE-8805-4CA4-9199EA4178912605 In Kister v. W.N. Tuscano Agency, Inc., the insured, a business that provides home heating fuel to residential customers, purchased an insurance policy from the insurer to cover its business operations.  The policy included a standard exclusion for any pollution, however, the insured purchased an endorsement titled “Pollution Liability-Limited Coverage for Covered Autos Subject to Aggregate Limit,” which provided coverage in the event a covered vehicle was “upset or overturned in the course of transit or was involved in a collision with another object while in the course of transit.”  The insured was sued by a customer, after the customer discovered fuel on the ground and around the tank where the fuel had been transferred.  The insured filed a claim, and the insurer denied the claim on the basis that the incident was excluded under the policy’s pollution exclusion.  The insured sued for bad faith, among other causes of action.  The insurer filed preliminary objections in the nature of a demurer (i.e. a motion to dismiss) to the insured’s bad faith claim.  The court noted that the test for granting preliminary objections in the nature of a demurrer is “whether it is clear from all of the facts pleaded that the pleader will be unable to prove facts legally sufficient to establish his or her right to relief.”  The court found that the policy did not provide coverage for the incident for which the insured sought coverage. The court noted that the insured failed to show or bring forth any evidence to prove that the insurer did not have a reasonable basis for denying the claim.  Accordingly, the court sustained the insurer’s preliminary objections and dismissed the bad faith claim. Date of Decision: August 26, 2009Kister v. W.N. Tuscano Agency, Inc., No. 791 CIVIL 2008, Common Pleas Court of Somerset County, Pennsylvania, 2009 Pa. Dist. & Cnty. Dec. LEXIS 96, (C.C.P. Somerset August 26, 2009) (Klementik, J.). Coverage Issues Fri, 22 Jan 2010 04:05:00 GMT http://www.pabadfaithlaw.com/display_blog.cfm?bid=486264EE-8805-4CA4-9199EA4178912605 http://www.pabadfaithlaw.com/display_blog.cfm?bid=663C8D13-DDC0-4C0F-8C14574C7A1FC442 In Hered, LLC v. Seneca Insurance Company, the insurer denied the insured’s claim for a fire loss and damage to its business premises on the basis that the insured fraudulently misrepresented the functioning of the sprinklers in the insured building.  The insured sued the insurer for breach of contract and bad faith. The insurer filed a motion to exclude expert testimony of the public insurance adjuster who had been hired by the insured to adjust its fire loss. The insurer argued that a public adjuster should not be allowed to testify that the insurer acted in bad faith in handling the insured’s claim and failing to pay the claim.  At oral argument, the insured’s counsel conceded that the expert was not qualified and competent to testify that the insurer acted in bad faith. The court held that while expert testimony may be appropriate to establish that an insurer lacked a reasonable basis for denying an insured’s claim, in the present case, the insured could not present expert testimony regarding the bad faith claim.  Accordingly, the court granted the insurer’s motion to exclude expert testimony with respect to the bad faith claim.  The court denied the insurer’s motion to exclude expert testimony with respect to the expert’s opinion that the insurer had violated the Unfair Insurance Practices Act  (UIPA).  The court found that the probative value of the expert testimony substantially outweighed any danger of  unfair prejudice to the insurer and that any possible prejudice could be cured by an appropriate jury instruction.Date of Decision: February 21, 2008Hered, LLC v. Seneca Ins. Co., Civil Action No. 3:CV-06-0255, United States District Court for the Middle District of Pennsylvania, 2008 U.S. Dist. LEXIS 111943 (M.D. Pa February 21, 2008) (Blewitt, U.S.M.J.). Experts Thu, 21 Jan 2010 04:57:00 GMT http://www.pabadfaithlaw.com/display_blog.cfm?bid=663C8D13-DDC0-4C0F-8C14574C7A1FC442 http://www.pabadfaithlaw.com/display_blog.cfm?bid=461C5201-2F2D-4179-A772028D9B131E6C In Johnson v. Progressive Insurance Company, the insured’s car was rear-ended by another vehicle, resulting in a knee injury.  The insured’s automobile insurance included $100,000 in underinsured motorist (“UIM”) benefits.  Over one year after the accident, the insured advised the insurer that he intended to pursue his UIM coverage.  Within days, the insurer acknowledged the claim and promptly consented to the insured’s request to settle the underlying tort action against the driver of the other car.  One month after the insured settled his tort claim, the insurer requested documentation to support the nature and extent of the insured’s injuries, as well as information regarding the insured’s five prior automobile accidents.  Instead of providing the requested documentation, the insured made a demand for arbitration and suggested that the insurer’s request relating to the prior accidents was made in bad faith.  The insured did not provide the insurer with permission to review his medical records for another month, and the insurer did not receive all of the medical records for an additional four months. The insured demanded the full amount of UIM coverage of $100,000, and the insurer offered $30,000. At arbitration, the insured was awarded $75,000.  The insured subsequently sued the insurer for bad faith.  The trial court granted the insurer’s motion for summary judgment, and the insured appealed.  The Superior Court affirmed the trial court, stating that there was “no question that the claim was handled promptly and professionally by the insurer.”  The court found that the facts involved nothing more than a normal dispute between an insured and insurer over the value of an UIM claim. The court noted that the insurer’s offer was slightly less than fifty percent of the insured’s award, and emphasized that bad faith is not present merely because an insurer makes a low but reasonable estimate of an insured’s damages.  The court stated that allowing an action to proceed under these facts “would invite a floodgate of litigation any time an arbitration award is more than an insurer’s offer to settle, even though the award is substantially below the insured’s demand.”Date of Decision: December 28, 2009Johnson v. Progressive Ins. Co., No. 3173 EDA 2008, Superior Court of Pennsylvania, 2009 Pa. Super. LEXIS 4988, (Pa Super. Ct. December 28, 2009) (Bowes, J.)http://www.aopc.org/OpPosting/Superior/out/a19037_09.pdf Claims Handling Procedures Wed, 20 Jan 2010 17:43:00 GMT http://www.pabadfaithlaw.com/display_blog.cfm?bid=461C5201-2F2D-4179-A772028D9B131E6C http://www.pabadfaithlaw.com/display_blog.cfm?bid=AFC91EDF-4D8E-4857-8EB185D94FAC6860 In Rice v. Allstate Assurance Company, the insured filed a complaint against the insurer for breach of contract and bad faith pursuant to 42 Pa. C.S.A. § 8371. In the insured’s breach of contract claim, he sought damages in the amount of $16,428.60 plus interest and penalties.  In his bad faith claim, the insured requested damages “in excess of $ 50,000.00” plus compensatory damages and punitive damages, interest, costs and attorney's fees. The insurer filed a timely notice of removal of the case to federal court based on diversity jurisdiction, and the case was removed to federal court. The insured filed a motion to remand the case to state court, alleging that the amount in controversy did not exceed $75,000. The court stated that since the insured did not make a demand for an exact monetary amount with respect to the bad faith claim, it had to make an independent appraisal of the claim and after a generous reading of the complaint, determine the reasonable value of the rights being litigated, including the value of potential compensatory and punitive damages.  The court emphasized that in order for a case to be remanded, it must be evident to a legal certainty that the insured cannot recover an amount greater than the $75,000 required for diversity jurisdiction.  The court found that based on the relief requested in the complaint, the insured did not expressly limit the amount in dispute to less than $75,000.  The court concluded that it could not be stated to a legal certainty that the insured could not recover more than the jurisdictional amount of $ 75,000.  Accordingly, the magistrate judge recommended that the insured’s motion to remand be denied.Date of Decision: December 8, 2008Rice v. Allstate Assur. Co., Civil Action No. 3:CV-08-1706, United States District Court for the Middle District of Pennsylvania, 2008 U.S. Dist. LEXIS 111820 (M.D. Pa. December 8, 2008) (Blewitt, U.S.M.J.). Procedural Issues Tue, 19 Jan 2010 20:39:00 GMT http://www.pabadfaithlaw.com/display_blog.cfm?bid=AFC91EDF-4D8E-4857-8EB185D94FAC6860 http://www.pabadfaithlaw.com/display_blog.cfm?bid=9BD5F559-01B5-4D62-B8F1C6C1CEF787B4 In Excelsior Insurance Company v. Incredibly Edible Delites, Edible Delites (“IED”) and Incredible Franchise Corp.’s (“IFC”), the entity that issued franchises on behalf of IED, had obtained an insurance policy from the insurer for commercial general liability coverage. In the paperwork provided by the insurer, IFC was described as an “Additional Insured - Grantor of Franchise.” The insureds understood this to mean that IFC was an additional insured under the policy. The insureds made a claim under the policy for costs they had incurred defending against a lawsuit. The insurer filed a complaint seeking declaratory relief and a determination of the rights and responsibilities of the parties under the insurance policy. The insureds filed counterclaims for breach of contract, breach of covenant of good faith and fair dealing and statutory bad faith. The insurer filed a motion to dismiss the claims. The insurer argued that IFC’s bad faith claim failed because it had admitted in its pleadings that it was not an insured under the policy because the policy described IFC as an “Additional Insured - Grantor of Franchise” and at no time had IFC granted a franchise to IED. The court found that IFC had adequately plead that it was an insured under the policy. The court dismissed the insured’s claim for breach of the duty of good faith and fair dealing but stated that the insureds would be permitted to amend their pleading in order to allege that the conduct underlying their breach of duty of good faith claim supported their breach of conduct or statutory bad faith act claim.Date of Decision: December 17, 2009Excelsior Ins. Co. v. Incredibly Edible Delites, Civil Action No. 09-3198, United States District Court for the Eastern District of Pennsylvania, 2009 U.S. Dist. LEXIS 118247 (E.D. Pa December 17, 2009) (O’Neill, J.).http://www.paed.uscourts.gov/documents/opinions/09D1480P.pdf General Bad Faith and Litigation Issues Fri, 08 Jan 2010 16:32:00 GMT http://www.pabadfaithlaw.com/display_blog.cfm?bid=9BD5F559-01B5-4D62-B8F1C6C1CEF787B4 http://www.pabadfaithlaw.com/display_blog.cfm?bid=FD3CBA63-A43F-4F1C-96D267A9BAD0C40C In Pine Grove Manufactured Homes v. Indiana Lumbermens Mutual Insurance Company, the insured sued Indiana Lumbermens Mutual (“ILM”) for bad faith and breach of contract after ILM refused to apply the proceeds from one of the insured’s other insurance policies to the deductible under the ILM policy. ILM joined its broker, Chamberlin & Reinheimer Insurers, Inc. (“CRI”), as a third-party defendant. The third-party complaint sought indemnification and/or contribution “with respect to the breach of contract claim.” CRI then filed a motion to strike or, in the alternative, dismiss ILM's third-party complaint. The court denied both motions in its October 23, 2009 memorandum and order.  A summary of the earlier decision in this case can be found on this Blog at http://www.pabadfaithlaw.com/day_blogs.cfm?d=11&m=11&y=2009. The court stated that as its insurance broker CRI was the insured’s agent, and therefore, owed CRI a duty of care to act as a reasonably prudent insurance broker. The court held that CRI breached this duty, which caused the indivisible harm that resulted when ILM did not apply the other policy’s proceeds to the ILM policy deductible. Accordingly, the court held that CRI was a joint tortfeasor whose negligence, along with ILM’s bad faith, caused the harm to the insured and as joint tortfeasors, ILM could be entitled to contribution from CRI. CRI filed a motion for reconsideration. CRI argued that: (1) the court misapprehended the allegations raised in the third-party complaint when it based its analysis on contribution for the bad faith claim, rather than limiting its analysis to contribution on the breach of contract claim, and (2) that the court committed an error in law when it held that CRI can be jointly liable to the insured for bad faith.The court recognized that it had mistakenly read the third-party complaint as covering the underlying bad faith claim. The court held that ILM could not have a right to contribution on the breach of contract claim because CRI cannot be liable jointly and severally in tort for a claim based on breach of contract theory. The court granted CRI’s motion for reconsideration and dismissed the third-party complaint's count for contribution on that ground.The court held that it did not err in holding that CRI and ILM might be joint tortfeasors based on the injury created by the confluence of CRI's negligence and ILM's bad faith. Therefore, the court did not grant the motion for reconsideration on that basis. Date of Decision: December 8, 2009Pine Grove Manufactured Homes v. Ind. Lumbermens Mut. Ins. Co., Civil Action No. 3:08-CV-1233, United States District Court for the Middle District of Pennsylvania, 2009 U.S. Dist. LEXIS 114772 (M.D. Pa December 8, 2009) (Caputo, J.). General Bad Faith and Litigation Issues Wed, 06 Jan 2010 22:34:00 GMT http://www.pabadfaithlaw.com/display_blog.cfm?bid=FD3CBA63-A43F-4F1C-96D267A9BAD0C40C http://www.pabadfaithlaw.com/display_blog.cfm?bid=7838A723-A3DB-4085-971842053B8B6277 In Collins v. Allstate Insurance Company, after the case was referred to arbitration, the insurer timely moved for partial summary judgment as to the insured’s claims for breach of contract and bad faith. Plaintiff claimed that summary judgment was premature because his attorneys had not had the opportunity to depose the insurer’s representatives. The insured did not submit any evidence that he had issued any notices for depositions before the insurer filed its motion for partial summary judgment. The court found that the insurer’s motion was not premature, but dismissed the motion without prejudice in order to provide the insured with more time for discovery. The court stated “Although plaintiff's delay in seeking depositions of [the insurer’s] representatives is very troubling, it is well established that a court ‘is obliged to give a party opposing summary  judgment an adequate opportunity to obtain discovery,’ especially when, as here, relevant facts are within the control of the moving party.” The court found that the fact-specific inquiries required in examining plaintiff's claims and the short period of time for discovery in arbitration matters provided a sufficient basis to permit the additional discovery sought by the plaintiff. The court provided the plaintiff with 45 days to take depositions.Date of Decision: December 10, 2009Collins v. Allstate Ins. Co., Civil Action No. 2:09-cv-01824-WY, United States District Court for the Eastern District of Pennsylvania, 2009 U.S. Dist. LEXIS 115778 (E.D. Pa  December 10, 2009) (Yohn, J.).http://www.paed.uscourts.gov/documents/opinions/09d1460p.pdf Discovery and Evidence Wed, 06 Jan 2010 22:25:00 GMT http://www.pabadfaithlaw.com/display_blog.cfm?bid=7838A723-A3DB-4085-971842053B8B6277 http://www.pabadfaithlaw.com/display_blog.cfm?bid=D747EC6D-F37A-4A37-8B8345A296CE68FE In Neiman v. American International Group, Inc., the insurer refused to pay the proceeds of a term life insurance policy stating that the “facts pertaining to past medical history were misrepresented in the application.” The insured failed to disclose that he had cancer. The beneficiary of the policy sued the insurer for breach of contract and bad faith. The insurer alleges that the insured knowingly or in bad faith concealed information concerning his medical history, which was material to its decision to insure him. The insurer had previously filed a motion for summary judgment. In the court’s memorandum and order denying the motion, the court found as a matter of law that the application contained false representations that were material to the risk undertaken by the insurer. The court denied the motion for summary judgment solely because there was a genuine issue of material fact concerning whether the insured made the statements knowing them to be false or in bad faith.The insurer filed a motion in limine to dismiss the insured’s claim for bad faith. The court granted the motion to strike the bad faith claim finding that the insurer had a reasonable basis to deny the claim. Date of Decision: December 7, 2009Neiman v. Am. Int'l Group, Inc., Civil No. 1:CV-08-1535, United States District Court for the Middle District of Pennsylvania, 2009 U.S. Dist. LEXIS 113483 (M.D. Pa December 7, 2009) (Rambo, J.) Reverse Bad Faith Tue, 05 Jan 2010 16:32:00 GMT http://www.pabadfaithlaw.com/display_blog.cfm?bid=D747EC6D-F37A-4A37-8B8345A296CE68FE http://www.pabadfaithlaw.com/display_blog.cfm?bid=4C3F65A0-F7D6-44AA-953C121C8C038B45 In Hayes v. American International Group, a physician made a claim against his disability insurance after suffering disabling cervical and lumbar injuries at work. The insured alleged that, as part of the initial claim evaluation, he disclosed the fact that he continued to work five hours a week after the accident. The insured received disability payments for approximately four years until his benefits were terminated.  The insurer terminated the insured’s benefits because he had been observed through surveillance performing activities inconsistent with his claimed disability, including engaging in the practice of medicine. The insured sued his carrier for bad faith alleging that the insurer had no reasonable basis for denying his claim because the insurer knew, at the time that it found him to be totally disabled, that he was able to work part-time, and therefore, acted unreasonably when it terminated his benefits because he was observed practicing medicine.  The court denied the insurer’s motion to dismiss the bad faith claim finding that the insured’s factual allegations were sufficient to state a plausible claim at that stage of the proceedings that the insurer acted unreasonably and in bad faith in denying his claim. Date of Decision: December 1, 2009Hayes v. Am. Int’l Group, Civil Action No. 09-2874, United States District Court for the Eastern District of Pennsylvania, 2009 U.S. Dist. LEXIS 111397 (E.D. Pa December 1, 2009) (McLaughlin, J.).http://www.paed.uscourts.gov/documents/opinions/09d1432p.pdf General Bad Faith and Litigation Issues Mon, 04 Jan 2010 17:39:00 GMT http://www.pabadfaithlaw.com/display_blog.cfm?bid=4C3F65A0-F7D6-44AA-953C121C8C038B45 http://www.pabadfaithlaw.com/display_blog.cfm?bid=7C5E220F-C72A-4943-AD18675EAC384BF7 In R&N Automobile, Inc. v. Travelers Casualty Insurance Company of America, the court determined that documents inadvertently produced by the insurer were protected by the attorney-client privilege. The court refused to accept plaintiff’s argument that the documents were not privileged because the action was for bad faith. The court noted that several courts have held there is no bad faith exception in Pennsylvania.Date of Decision: December 3, 2009R&N Auto., Inc. v. Travelers Cas. Ins. Co. of Am., Civil Action No. 1:09-CV-0326, United States District Court for the Middle District of Pennsylvania, 2009 U.S. Dist. LEXIS 112269 (M.D. Pa December 3, 2009) (Conner, J.). Discovery and Evidence Mon, 04 Jan 2010 17:38:00 GMT http://www.pabadfaithlaw.com/display_blog.cfm?bid=7C5E220F-C72A-4943-AD18675EAC384BF7